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  • The Reserve Bank’s six-monthly Financial Stability Report is out.
  • It is imperative to improve New Zealand’s financial system resilience while conditions are conducive.
  • Work required to achieve financial resilience.

The Reserve Bank’s six-monthly Financial Stability Report, or FSR, has been released as the first  FSR since the Reserve Bank proposed roughly doubling banks’ required capital levels, as analysts at ANZ noted.

“As well as the words around that, markets will be interested in whether the loan-to-value mortgage lending restrictions are eased. These are still binding, but there are many other regulatory headwinds for the housing market too, including tax changes, the foreign buyer ban, and moves to improve a lot of tenants. The Auckland housing market is now decidedly cool, but mortgage rates have dropped substantially in recent times.”

FSR key notes

  • The financial system remains resilient to a broad range of economic risks that remain elevated and ongoing effort is necessary  to bolster soundness and efficiency in the system.
  • Current LVR settings remain appropriate for now.
  • It is imperative to improve New Zealand’s financial system resilience while conditions are conducive.
  • Work required to achieve financial resilience.

“On balance we think the RBNZ will be happy to let things run for a while as it assesses how the opposing forces play out, but it’s possible they deliver a small tweak in recognition of the fact that these restrictions were only ever intended to be temporary. If so, it’ll be small and not a game-changer,”

the analysts at ANZBank explained.

About  The Financial Stability Report

The Financial Stability Report, released by  Reserve Bank of New Zealand, is published six-monthly. In the Financial Stability Report we assess and report on the soundness and efficiency of the New Zealand financial system.